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Action under NIA only if cheque issued for discharge of debt

Written by: Staff

New Delhi, July 5 (UNI) The Supreme Court has held that one can be prosecuted under section 138 of the Negotiable Instrument Act (NIA) only if the cheque was issued for discharge of a debt.

A bench comprising Justices S B Sinha and P P Naolekar yesterday ruled that cheque issued as security or for any other purpose would not come within the purview of section 138 of the Act.

Appellant M S Narayana Menon alias Mani had issued cheque for Rs.

2,95,033 on August 17,1992 and the same was dishonoured for want of sufficient funds when presented for encashment. The appellant took the defence during trial that the cheque was given by him to the opposite party to enable him to tide over his financial difficulties.

The trial court, however, convicted him and he was sentenced to one year's rigorous imprisonment . On appeal the sentence and conviction was set aside against which the complainant preferred an appeal in Kerala high court and the appeal was allowed by the high court vide judgment dated May 24,1999.

The second respondent, a member of the stock exchange,Cochin, was doing the business of share broker under the name and style of 'Midhu and Midhun Co.' The case of the respondent no 2 was that the cheque was issued for discharge of a debt while the defence of the appellant was that it was given as security.

The apex court while setting aside the impugned judgment of the high court restoring the sentence of the appellant observed,"The appellant clearly said that nothing is due and the cheque was issued by way of security. The said defence has been accepted as probable. If the defence is acceptable as probable the cheque therefore can not be held to have been issued in discharge of the debt as for example , if a cheque is issued for security or for any other purpose the same would not come within the purview of section 138 of the Act." Commenting on the approach of the high court in the matter, the apex court observed,"Even while exercising an appellate power against a judgment of acquittal, the high court should have borne in mind the well settled principles of law that where two views are possible, the appellate court should not interfere with the findings of acquittal recorded by the courts below." The books of accounts maintained by respondent no 2 did not reflect the correct state of affairs. A discrepancy of more than Rs.1,400,000 was found.

The case was that out of Rs 3 lakhs owed by the appellant, he had paid Rs 5000 in cash and had issued a cheque for the balance amount.


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